Agent Resource Center

Monthly Agent Newsletter

August 2017

 
 

With millennials starting to impact the housing market — making up 42% of all homebuyers today — it's important to know what this generation is looking for in a home.

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Help your homeowning clients understand the pros and cons of purchasing an investment property.

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The Bank of America Affordable Loan Solution® mortgage is designed for qualified modest-income clients who may not be able to make a large down payment.

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Know what millennials want in a home

According to a recent article in Business Insider, housing inventory has reached historic lows across the country, which means there's stiff competition out there for homebuyers of every age.footnote1

But with millennials starting to impact the market — making up 42% of all homebuyers todayfootnote2 — it's important to know what this generation is looking for in a home.

The recently released Bank of America Homebuyer Insights Report reveals that:

75% of today's first-time homebuyers are skipping the "starter home" in favor of purchasing a home that will meet their future needs, even if that means they have to wait to save more.

First-time buyers are motivated more by emotional factors (76%) than financial factors (63%) — particularly the desire to have a place they can call their own.

Location, location, location is as important as it's ever been, with 71% saying neighborhood is "extremely important" as a factor in deciding where to buy.

Suburban single-family homes are still a hot commodity for the majority of all homebuyers and 52% of first-time buyers.

For more information on the latest home buying trends, check out the full Homebuyer Insights Report.

1"Baby boomers are making it harder for millennials to buy homes," BusinessInsider.com

2Bank of America Homebuyer Insights Report

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Could an investment property benefit your clients?

For many people, buying an investment property to rent out is an attractive option to create a source of consistent cash flow while potentially enjoying helpful tax benefits.

But like any financial decision, the choice of whether anyone should buy an investment property or not is a highly personal one. Buying a property is, in some ways, the easiest part. Potential buyers also need to weigh costs that go beyond the immediate financial impact, including time, effort, property maintenance and upgrades, and more. Your clients should always contact their tax advisor about their particular situation.

Here are three big pros and cons clients should consider:

Pros:

  • As we've already mentioned, turning an investment property into a rental has the potential to generate extra income on a regular basis. Plus, if it's a seasonal rental, owners may be able to use it themselves for up to two weeks while still being able to deduct property maintenance expenses.
  • Owners may be able to deduct mortgage interest, insurance and all maintenance expenses against the income of their investment property. Clients should consult a tax advisor about their particular situation.
  • Thanks to a rule called the 1031 Exchange, owners may be able to sell a rental and invest in another of "like kind" within a limited time frame without having to pay capital gains tax. Special rules apply, so clients should consult their tax advisor in advance.

Cons:

  • Even with dream tenants, being a landlord can take a lot of time, effort and money. Potential owners should understand that they are responsible for maintaining the property, making repairs and upgrading as needed. A property management company can help, but that's also an extra cost that needs to be taken into account.
  • Not everyone qualifies for tax deductions, and tax codes may change annually. Clients should always check with their tax advisor to help make the best decision for their unique circumstances.
  • If owners decide to sell their property at some point, it could take some months to complete the process — and whether or not they come out ahead depends on the health of the market at the time.

If your clients have questions about financing an investment property, contact your lending specialist.

Sources:
"The pros and cons of owning rental property," Investopedia.com

"Should I buy an investment property?" Time.com

"What returns will I make on an investment house?" Time.com

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Product spotlight: Help clients seeking a lower down payment

Are you working with clients who may be concerned about the need to make a large down payment? The Affordable Loan Solution® mortgage from Bank of America could be a good option for them.footnote1 As a fixed-rate loan for modest-income borrowers, the Affordable Loan Solution mortgage offers competitive rates as well as the following features:

  • Down payment as low as 3% with no mortgage insurance required
  • Non-traditional credit (CLTV and DTI limits apply)
  • Boarder income from a one-unit primary residence may be considered as stable monthly income provided it meets requirements
  • Allows co-ops as an acceptable property type
  • Allows non-permanent resident aliens under the same terms and conditions as U.S. citizens
  • Homebuyer education may be required for first-time buyers through a HUD-approved counseling provider or Connect to Own®, Bank of America's nationwide network of counselors
  • Maximum income and loan amount limits apply (varies by location)

In addition to the possibilities offered by an Affordable Loan Solution mortgage, your clients may be able to lower their up-front expenses with down payment and cost savings programs they find through the Bank of America Down Payment Resource Center.footnote2

Contact your lending specialist for more information.

1Available for fixed-rate purchase loans with terms of 25 or 30 years and on primary residences only. Certain property types are ineligible. Borrower(s) must not have an individual or joint ownership interest in any other residential property at time of closing. Maximum purchase loan-to-value is 97% and maximum combined purchase loan-to-value is 103%. For loan-to-values >95%, any secondary financing must be from an approved Community Second Program; ask for details. Homebuyer education may be required. Restrictions apply regarding co-borrowers. Maximum income and loan amount limits apply.

2Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer, or repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest, and borrowers should become fully informed prior to closing. Not all applicants will qualify. Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply.

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This publication is provided for your convenience and information only. Bank of America, N.A. assumes no liability for loss or damage as a result of your reliance on information in this publication. Photos are for illustration purposes only and are not to be construed as an endorsement of a particular product or company. Unless expressly disclosed otherwise, Bank of America, N.A. is not affiliated with or responsible for the products or services of any company that may be mentioned or depicted in this publication. Our goal is for the contents of this publication to be accurate as of the date this issue was printed. However, we do not guarantee that any content is accurate or complete.

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